Low interest rates from the US Federal Reserve are designed to
have a dual positive effect: to help the economy and debtors.

But there is a dark side to this interest rate
austerity: the relentless tightening of pressure on savers,
company pension plans and other investors who rely on
fixed-income returns.

The problem is: This kind of reasoning that loose money is
screwing over pension plans gets cause and effect completely
opposite.

The reason rates are low is because the economy is still quite
weak, and there's virtually no inflation to speak of.

Remember, 2011 saw the slowest non-recessionary growth in
history.

The rate of inflation, meanwhile, also remains pretty low by
historical standards.

So when the economy is horrible, you can't expect to get great
returns with risky investments. And with inflation at pathetic
levels, there's very little risk of taking on a fixed income
investment.

Therefore it's not surprising to see this chart: 10-year yields,
inflation, and growth have all been in a big, secular decline
since 1980.

In this chart, the thick blue line is yields, GDP is in
green, and inflation is in red,

With fixed income yielding so little, how on earth do people
imagine that their Federally Guaranteed bank deposits are
supposed to give them anything in return?

But why can't Bernanke just, you now, raise rates or something!?

Well think about what that means: Essentially people are asking
the central bank to create a special carve-out in the economy,
where despite all that's happening, one class of
people—savers—gets to have above-average returns on their money.
The whiners are demanding that despite the pathetic returns to be
held elsewhere in the world, their savings account should be a
place of plump yields. How on earth is this fair?

While we're certain that pension funds with big mandates do find
it difficult to hit their goals in this environment, it's not
because of Bernanke or ZIRP, it's because the rate of growth (and
therefore expected stock market returns) is so lousy. THAT's the
problem. If anything, pension funds should be
blasting the forces of austerity, who are driving government
spending lower, and causing GDP to be so mediocre.

But let's say for a second that Bernanke did suddenly start
hiking rates. Would that accomplish anything? First of all, we'd
start exacerbating one of the biggest problems in the economy
there is: We'd be incentivizing people to save more at a time
when the biggest problem is a lack of investment and hiring. And
we're not even convinced that rates would rise. Think about it:
An interest rate hike would discourage people from taking risk,
meaning they'd dump their stocks ... and buy Treasuries, driving
the curve even lower!

And while we sympathize with people not getting returns on their
money, the fact of the matter is that the big problem we have
right now is that people have too much debt, not an abundance of
cash that's just sitting there not returning anything.

The bottom line is this: Yes, it sucks that pensioners and
garden-variety savers aren't getting returns, but it also sucks
for everyone in the U.S. right now, because the economic outlook
seems to be so mediocre. Welcome to the club!

Until growth and inflation return to anything that looks robust,
savers will have to be stuck with the same garbage returns boat
the rest of us are in.